In the last couple of years, we have seen several centralized exchanges emerge from the crypto space to ease the buying and selling cryptocurrencies. The bulk of these exchanges is concentrated on the Ethereum network, as it is one of the first blockchains to use smart contracts. It has a community of devs and tools for building useful DApps.
But, it isn’t centralized exchanges that are making waves. Decentralized exchanges or DEXs, like PancakeSwap, have become quite popular. Unlike centralized exchanges that are controlled by a single entity, DEXs function without a middleman, and that’s the beauty of it. DEXs allow you to purchase and sell orders 24/7 and without restrictions. You may ask if DEXs like PancakeSwap take root like their centralized counterparts. They are built on the Binance Smart Chain and not on the more popular Ethereum blockchain. PancakeSwap has established itself as a trusted exchange, but newbies may not be familiar with it. Let’s see what is PancakeSwap crypto and how to buy on the decentralized exchange.
What is PancakeSwap?
As we earlier established, PancakeSwap is a decentralized exchange built on Binance Smart Chain by anonymous devs and run by the smart contracts embedded on the network. It is another food-themed exchange that allows the trading of different cryptocurrencies without intermediaries, significantly reducing the cost of transactions. The good thing about PancakeSwap, like all DEXs, is that you have custody of your tokens.
PancakeSwap delivers a quality service that shares some similarities to UniSwap and SushiSwap (two Ethereum-based decentralized exchanges), but better. At least, that’s what many users say. The DEX is most notable for swapping and trading BEP-20 tokens, and you could bring in tokens absent in the exchange from the popular Binance crypto exchange via its Bridge. They become the Wrapped version of that particular token.
So, How Does It Work?
We are certain that this is the next question you would want to ask since the beginning of this article. PancakeSwap doesn’t work differently from other DEXs. It uses an automated market maker (AMM) that depends on liquidity pools to facilitate trades.
Unlike order books that pair you with a compatible dealer, AMM requires users to lock their tokens in a liquidity pool to receive liquidity provider tokens. You can make the trade you want, and the interesting thing is you earn rewards for locking your coins for that period.
So, the swapping takes place in the liquidity pool. Here, users can trade one token for another. As we have already said, trading in a decentralized exchange requires no intermediary to cut down transaction fees and speed up the process.
But, buying tokens isn’t the only thing you get from PancakeSwap. The exchange also allows you to stake and farm coins. Let’s begin with the farm part.
Farming tokens involve depositing and locking up the LP token for some time to gain rewards. In the case of PancakeSwap, staking rewards you with CAKE, the exchange token. LP tokens could be BUSD, BNB, ETH, etc. Interestingly, you could even earn bigger rewards when staking CAKE.
With CAKE in your possession, you can stake it in a pool called SYRUP to earn other cryptocurrencies. There’s also an auto-stake option that re-stakes your CAKE automatically. This is useful when you want to compound your rewards. Note that you can also earn CAKE even if you staked CAKE.
How to Buy on PancakeSwap
Let’s get to the main thing. How do you use PancakeSwap? Newbies will likely struggle, and it’s understandable. However, this is where we come in – to make your PancakeSwap experience smooth.
At first, you’ll observe that most features in the exchange are inaccessible. This will continue until you connect a wallet, such as MetaMask or Trust Wallet. But, wait, is it possible to connect an Ethereum wallet like MetaMask wallet to Binance Smart Chain? Yes, it’s possible. BSC is built so that it can interact with MetaMask conveniently.
If you already have a MetaMask wallet, all you need is to connect it. If you don’t, go through the steps below.
1. Download MetaMask from the website, Google, or iOS store and install.
2. Add it to the browser by switching the extension from the browser settings on your phone or laptop.
3. Click on the three dots in the top right corner after opening the wallet.
4. Select the profile icon > Settings > Networks
5. Click on Add Network, enter the technical details about BSC and save.
The exciting part of using PancakeSwap is you don’t have to share personal information when signing up, as creating a profile is optional. So, your anonymity is completely maintained.
How to Use PancakeSwap with MetaMask
With your connected wallet, you have access to all the functions on the DEX. You can swap tokens, add liquidity, farm, stake, and can even enter a lottery with your CAKE. The lottery feature gives you the chance to earn 50% of the lottery pool if your ticket number generated randomly matches the numbers on the winning ticket.
What’s more? You can win some of the most beautiful NFTs on the exchange. You can keep the items or trade them for the corresponding CAKE value.
How Safe is PancakeSwap
According to the PancakeSwap team, the decentralized exchange has been properly audited. But, it doesn’t by any means indicate that it’s completely safe. Adding funds into the exchange is risky because the smart contract could be manipulated. Even for the highly audited project, bugs could be found.
Given the risks associated with decentralized exchanges, they must be on top of the security situation all the time. This means periodically conducting audits to ensure that the smart contract is secure and bug-free. This is where QuillAudits come in.
QuillAudits is a reputable cybersecurity solution from QuillHash Technologies that audit digital wallets, smart contracts, and decentralized applications. QuillAudits use manual and automated tools to validate the security behavior of the smart contract. The audit firm can help PancakeSwap and other exchanges maintain the best security practices and prevent breaches. You can reach out to QuillAudits here for assistance in auditing projects.
Reach out to QuillAudits
QuillAudits is accomplished in delivering efficient smart contract audits. If you need any assistance in the audit of the smart contracts, feel free to reach out to our experts here!
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